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Can you please explain the GRAFFOF question in the BPP revision kit, as to how hey got the respective values of released funds from receivables and payables?
Currently trade receivables = 260 on sales of 1600 pa or on sales of 1600/365 per day
This represents 260/(1600/365) = 59.31 days of sales
If credit is shortened to 30 days from its current 59.31 days ie down by 29.31 days, then this will reduce receivables by 29.31 x sales per day = 29.31 x 1600/365 = 128
Currently trade payables are 75 on purchases of 1375/365 per day.
Days of credit taken are therefore: 75/(1375/365) = 19.90 (about 20 days). If 40 days credit were taken, payables would therefore approximately double to 150 leaving another 75 in the bank.
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